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Rational memory with decay

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  • Neligh, Nathaniel

Abstract

Historically, economic models of memory have neglected a pivotal aspect: decay, the established notion that memories deteriorate over time, resulting in a loss of fidelity. In this paper we show that a framework of rational memory with decay can produce the recency effect and other intuitively appealing memory phenomena. We apply the framework to both finite time and dynamic programming settings, deriving a wide range of results with a focus on comparative statics and asymptotic behaviors. Many of our results can also be applied to multi-dimensional rational inattention settings where individuals have to split their attention across several information sources.

Suggested Citation

  • Neligh, Nathaniel, 2024. "Rational memory with decay," Journal of Economic Behavior & Organization, Elsevier, vol. 223(C), pages 120-145.
    • Handle: RePEc:eee:jeborg:v:223:y:2024:i:c:p:120-145
    DOI: 10.1016/j.jebo.2024.04.030
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    More about this item

    Keywords

    Memory; Imperfect information; Learning; Decision theory; Information theory;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics

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